South African imports of protein feed (oilcake or meal) increased 210% from 1990 to 1998/1999.
Over that same period local production increased by only 14% and imported protein feed now
accounts for over 50% of local requirements at an estimated annual import cost of about R1
billion. Internationally, protein prices reached high levels in 1996/97 following increased Asian
demand but then fell considerably in response to the Asian financial crisis and increased supply.
The South African Protein Research Trust, who invest in research aimed at stimulating the local
protein industry, are interested in the most likely long-term trends. Projections of world meal
prices and local protein requirements under a variety of scenarios indicate the possible cost of
future imports and the potential for local production. These can help strategists to make informed
decisions when evaluating plans that impact on future production capacity.
Two interactive spreadsheet models have been developed which estimate protein usage and price
under various scenarios and thereby serve as a decision support system. The first model projects
future world supply of and demand for oilcake and calculates equilibrium price and consumption
using estimated price elasticities of demand and supply. Demand projections are driven by
estimated population and income growth while supply is forecast based on past production
trends. The model incorporates dynamic income elasticities of demand that decline with rising
real incomes. Assuming a 3% annual growth in supply the model forecasts that real price for
protein meal will remain relatively constant at 1999 prices to 2020. However, if supply increases
linearly price is forecast to increase 22% by 2020. Developing Asia, notably China, accounts for
most demand growth and projections are sensitive to income growth assumptions for China.
A second model estimates South African consumption of oil cake to 2020 Novel features of the
model include: the price of protein is endogenous as it is generated by the international model; it
incorporates estimated rates of technological progress in livestock production, and predicts the
resulting real price change and; use is made of declining income elasticities of demand.
Population growth projections include the estimated effect of AIDS which could reduce
population growth rates by killing adults and children and reducing fertility amongst women who
are HIV positive. Total protein consumption in 2020 is projected at 1.54 million tons (a 24%
increase from 2000) under low income growth and 1.96 million tons (a 58% increase from 2000)
under high income growth. Declining broiler, egg and pork product prices (projected to decline in
real terms because of expected technological advances) contribute to increasing protein usage
even in the absence of significant real income growth rates. Population growth remains the most
important demand driver and scenario analysis reveals that alternative population growth rates
impact significantly on projections.